Being aware that the spreading Naxal menace cannot be tackled purely as a law-and-order issue, the government is readying a ‘hearts and mind’ plan to send youth from Maoist areas to industrial training institutes in major cities such as Kolkata and Hyderabad, while simultaneously rolling out a network of brand new training centres in 34 districts across nine states. Under this plan, about 5,000 school dropouts and unemployed youth from the country’s so-called “red corridor” districts will, starting August this year, board trains to travel to the country’s best industrial training centres.

The second leg of the plan involves placing youth trained under this plan with industries in neighbouring states and cities such as Mumbai and Hyderabad.

Conceived by the labour ministry, the plan has the backing of the home ministry, which is at the forefront of battling the Maoist problem and suffered a major embarrassment after 76 paramilitary personnel were killed in the Dantewada jungles early this month. The plan is estimated to cost around $1 billion and will be bankrolled by the Centre.

More than 95% of administrative blocks in districts worst hit by left-wing extremism have no training institutes or higher education opportunities. Work is underway to build 1,500 new industrial training institutes (ITIs) and 5,000 skill development centres (SDC) across the country using the public-private partnership model, but this does not include Naxal-hit areas, as the private sector is reluctant to venture there.

To remedy this, the new plan wants to set up at least one ITI and three SDCs in every block of these 34 districts. That translates to 228 ITIs and 927 SDCs, and until they come up over the next couple of years, the Centre will sponsor school dropouts and unemployed youth in these districts to train at existing institutes outside.

Finance & Economy

What are the advantages of allowing the entry of foreign banks as subsidiaries?

In a very good debate -- wherein both the people are arguing for the same thing -- two experts tell us why allowing foreign banks as subsidiaries of their parents is a better choice.

It comprises of six industries — crude production, petroleum refinery products, coal, electricity, cement and finished steel. They have a combined weight of 26.7% in the index of industrial production.

States baulk at independent debt management office plan

Plans for an independent office to manage governments’ debt has not found favour with some of the states that want the central bank to continue to manage their borrowings and the existing stock of debt. The government had proposed to create a DMO in 2007-08 budget.

Some states are opposed to the idea for the simple reason that they do not want to disturb the existing arrangement, but others see it as altering the federal structure and are keen on maintaining their independence from the Centre.

These opposition from these states has come despite the finance ministry offering the states a stake in the National Treasury Management Agency that will act as government’s debt manager.

An independent debt management office will divest the Reserve Bank of India of the responsibility of managing government borrowings, removing the conflict of interest inherent in its role as the setter of interest rates and the banker to the government.

As an efficient debt manager, RBI should to try and minimise borrowing costs for the government, but this could interfere with its monetary policy management, especially in an environment of rising inflation. When inflation is high the central banks is required to maintain a tight monetary policy stance and raise rates.

The existing arrangement also interferes with efficient discovery of interest rates in the secondary market and comes in the way of development of a vibrant bond market.

World over central banks are only responsible for monetary management and do not even function as a regulator for banks. In the US, the treasury manages public debt, not the Fed. Other countries such as the UK and Portugal have set up DMOs to manage public debt.

What are commodity currencies?

Answer as excerpted from today's First Principle column:

These are currencies which essentially derive their strength from commodity exports from their respective markets. Also, in these countries, commodity exports are major source of foreign exchange inflows. Traditionally lesser developed economies in Africa and Latin America have come under this category. Despite the weaker correlation between commodity exports and currency strength, the Canadian, Australian, the New Zealand dollar and the South African Rand are still considered commodity currencies. In recent times, they have emerged as global currency traders’ favourite as there has been a general surge in commodity prices globally.

Investors fear the downgrade of these two nations may be the beginning of a series of such moves as most governments are burdened with debt after they spent their way out of recession following the credit crisis. Even the US is under threat of losing its top rating.

Standard & Poor’s cut Greece three levels to BB+, or junk, and lowered Portugal two steps to A as they stare at a default. Greek notes slid earlier as concern deepened that the nation will ask investors to accept delayed or reduced debt payments. The European Union, which had pledged to support Greece, has been dragging its feet on the conditionalities to extend a bailout.

Emerging markets could be the worst-hit in a sovereign crisis as global investors pull out funds in a flight to safety.

Language Lessons

ghoulish: Adjective

Suggesting the horror of death and decay

eg: For the Left, the spectre of the Third Front now haunts its other parliamentary illusions, with predictably ghoulish results.